Jobs and Income in 2011: Edging Up

There are some markets with fewer jobs this year compared to last, a situation which is not helping the local housing market despite very high affordability conditions. However, there are also many markets that added jobs on net over the past 12 months. In fact, in total there are 1.3 million more jobs in the country as measured by asking companies about their payroll count – which is known as payroll employment. By another measure, taken by asking households whether they are working or not, there are 360,000 more people working – which is known as household employment. However, even in the job-creating markets, consumers have been hesitant to make a major purchase like buying a car or a home. Nonetheless, continuing job additions in the aggregate should lead to higher home sales at some point.

Independent contractors, like many REALTORS®, are not on anyone’s payroll and hence would not be captured in payroll data, but in theory would be included in the household data. But long working hours does not mean higher income for independent contractors, since income is generated at the closing table. Note that the gap between household and payroll employment, which can be viewed as a proxy measure of independent contractors, is much wider in 2011 versus 2001.

Looking not at jobs but purely at income, the national personal income (everyone’s income combined) has risen by 5.3 percent from one year ago. It is a combination of some wage rate increase, more people working, and a rise in business, rental, and dividend income. Personal income is much less cyclical than jobs because there are automatic stabilizers in the economy. During bad times, more people pay less in taxes as they fall into lower tax bracket while more receive unemployment checks and food stamps. During good times, more people are pushed into a higher tax bracket while fewer claim unemployment checks.

The latest data clearly points to some net job creation and an improving overall income. Let’s hope these trends translate into more purchases of big ticket items.

Lawrence Yun is Chief Economist and Senior Vice President of Research at NAR. He directs research activity for the association and regularly provides commentary on real estate market trends for its 1 million REALTOR® members.